What if Uncle Sam Ran a Household on $200k, Not a Bureaucracy on $2 Trillion?

Federal spending translated into digestible figures

The United States budget is broken, and broken far beyond fixing. We could cut out all the pork, slash entitlements by 30% and still not have enough money to pay the bills.

There are people who say such dire talk over the budget deficit is just scare tactics. Once the economy turns around, tax revenue will pick up in kind. True, but our profligate spending has long outstripped even the revenue generated in a strong economy. Based on the pre-recession trillion in tax income, we would still be $800 billion in the hole.

Here are the cold numbers: This year we will spend about $3.5 trillion, and take in nearly $2.2 trillion.

Consider the 2010 federal budget of $3.46 trillion is enough to buy a brand-new Chevy Volt for one out of every four Americans. Now consider the deficit alone is only slightly larger than the total GDP of Spain.

Digging into real numbers shows how truly ugly things are. But it’s awfully hard to make sense of numbers that large.

So I thought it would be interesting to explore how dysfunctional things are using the example of a family budget. All dollar amounts you’ll see here are real and based on the actual U.S. federal budget for 2010, divided by a factor of 10 million.

Let me show you what I mean by turning federal expenses into monthly bills:

Does Your Family Spend 50% More Than It Earns?

America is a rich household that takes home $216,200 a year (estimated 2010 federal tax receipts). We are also a spendthrift household, throwing way $345,600 a year (estimated 2010 federal spending).

Those numbers alone should tell the tale pretty clearly. After all, how long could your family spend nearly 60% more than it earns before going bankrupt?

But let’s break it down further to show just how out of control things are, and see if we can find some ways to improve the family finances. Monthly, we take in about $18,016 for the bills. But our expenses break down along these lines.

$3,466 for other bills (Mandatory Spending). Let me interject here that while some of this stuff doesn’t sound like mandatory spending – like repair bills for your car after driving it into a brick wall (TARP bailout funds) – that doesn’t mean you can just not pay the obligation.

$5,500 for discretionary spending – which ranges from questionable stuff like trips to the movies but also worthy stuff like donations to a local charity. There also are expenses that are within our control to reduce, but not eliminate entirely. Running the A/C at 62 is a “discretionary” utility expense. But turning off your electric bill is not an option. More on this in a bit.

Some quick math and you get a grand total of $28,797 a month in expenses – meaning we’re $10,781 short on the budget.

Clearly, this is not sustainable. We’ve been coming up short for years and have been simply charging the balance to our credit cards (deficit spending) … but it’s time to start fixing this mess before it gets beyond our control.

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